They were among the 12 New Zealand companies included in Tearfund's guide for the first time, which builds on the wider list of Australian retailers that has been compiled by Baptist World Aid since 2013.

Icebreaker chief executive Rob Fyfe said taking part in the guide was simply not a priority for the company.

"We get approached by many organisations that want to engage us and survey our practices but we tend to work with those that we believe have reputable processes and are relevant to those markets that we are involved in."

He said Icebreaker's supply chain was ethical from the farm gate to the factory floor as it was independently audited and he had even visited the factories himself.

"I talk to the workers, I see for myself the standards, the pay rates, how many hours they're allowed to work each week, the creche facilities, the hospital facilities."

Icebreaker clothes are made in the United States, China, Vietnam and Bangladesh (Dakhar above). Photo: Tearfund

Icebreaker clothes are made in the United States, China, Vietnam and Bangladesh.

Farmers did not respond to requests for comment.

The median grade among the 12 New Zealand brands was a B-, which was better than the international average of C+, Tearfund chief executive Ian McInnes said.

Failing to check what was happening further along their supply chain was where most local retailers tripped up, he said.

"It's not unreasonable for companies to know from where their cotton comes, their down, who's piecing together the component parts of a garment and are those factories safe for workers."

Karen Walker was the most improved after upping its grade from C last year to a B+.

The designer said her company had made changes so everyone in its supply chain now knew what its policies were.

"We've also gone even deeper in terms of auditing our supply chain so we now work right back to fabrics and trims, not just garment producers. This is an ongoing process that we are committed to.

"In 2015 we asked Baptist World Aid to work with us, and include us in the report, to assist us in identifying additional areas that we could work on to make our ethical standards and systems even higher. Over the past 18 months we have put more resources behind testing and ensuring the stringency of our systems around manufacturing and sourcing," Ms Walker said in a statement.

Wellington's Kowtow Clothing and Liminal Apparel in Christchurch were top of the list with both achieving an A grade.

A cotton farm in India. Photo: Tearfund

Kathmandu had also improved its grade from B- to B+ this year and was the only retailer to know where all its down, and 80 percent of its cotton came from.

Kathmandu marketing manager Tim Loftus said the journey had not been easy but having strong relationships with its suppliers, many which the company had worked with for more than 10 years, had helped.

The outdoor clothing company has started helping other retailers check their supply chains and Tim Loftus said he would like to see other retailers putting their hands up if they needed.

"For us, sustainability is not a competitive piece it's more about raising the bar for the industry as a whole."

Retail analyst Chris Wilkinson, from First Retail Group, said it could be tricky for smaller retailers to track every stage of a garment's production, especially when different stages were completed in different countries.

But it's something that consumers were increasingly demanding, he said.

"The retailers will find they're pushed in that direction."

The wider report analysed 242 fashion brands from 106 companies that sold clothes in New Zealand and Australia. It found that overall retailers were trying to be more ethical. Since 2013, nearly a third more companies trace second tier suppliers, while the number of those tracing raw materials had increased by 45 percent.

More companies were also publishing their supplier lists, but Tearfund said this was where New Zealand fell behind, as no local retailer publicly discloses their supply chain.

While nearly half the companies said they were looking at increasing wages, in most cases pay was still below a living wage in that country and only applied to a portion of workers.